Compliance

Spotting by the Book

The magazine’s legal wiz shares a textbook case on what not to do when spot delivering a vehicle.

The editor sent me a few questions and points raised in a recent discussion among members of an F&I Facebook group. The topic: spot deliveries. Rather than go point by point, I thought I’d share

an e-mail a dealer friend of mine shared with me. See, my friend has a friend who is a lawyer. Evidently, that lawyer friend sometimes represents consumers in cases against car dealers. He also sometimes represents dealers. In the case I’d like to share with you, he was recommended to a consumer by a dealer who wanted to “level the playing field” with a competitor. The following, albeit slightly edited, is what the lawyer wrote:

ABC Legal Services

Dear Friend,

I’ve got a textbook case of what not to do. A dealer attempted a conditional “spot delivery” but put the customer out on a generic installment contract with no “unwind” language. It also had the dealer identified as “seller/creditor.” The third-party finance company refused the deal and reassigned it to the dealer. The dealer then forcefully repossessed the vehicle six days before the first payment was due.

The vehicle was titled in the customer’s name, with the lienholder shown as the third-party finance company. That means the dealer wasn’t even the correct repossessing party. I’ve talked with the regional manager who said the customer agreed to settle (duress and coercion … it was either take the dealer’s offer or walk).

I’ve already told them my civil complaint starts at false imprisonment (they blocked in her car), assault and battery (they tried to let the air out of the tires while she was in the car), conversion (they took her car when they had no right to do so and are now offering it for sale), coercion and duress (they made her take a rental and a check for trade allowance), breach of contract (consumer not in default), wrongful repossession, breach of the peace, unfair and deceptive collection practices and resulting intentional infliction of emotional distress.

And, concurrently with the civil complaint, I told them I’m filing with the Federal Trade Commission for violations of the Fair Credit Reporting Act, filing with the North Carolina Attorney General for improper conditional delivery (didn’t put the customer out on a dealer tag), and then with the state DMV for violations of NCGS 20-294 (4), (5) and (6) (fraud on customer, illegal repo, unfair and deceptive acts and practices).

The dealer already tried to institute his arbitration clause on me and I said he could discuss that on a summary judgment motion. Some of the above will stick. I also might include the third-party finance company as a defendant. I’ve also mentioned that the complaint will get publicity with regional papers, news outlets and the Internet.

I’m reproducing the lawyer’s letter here for a couple of reasons. First, dealers need to know that there are lawyers representing consumer plaintiffs who are very knowledgeable — and often more knowledgeable than dealers — about the laws that apply to the sale and financing of cars. Second, this letter serves as a good checklist for how not to execute a spot delivery transaction.

These transactions are difficult to do properly, which requires good documentation, a thorough understanding by the dealer of the laws and regulations governing them, and full disclosure to the customer about what’s happening. Spot deliveries are no place for abusive practices like those described above. They are risky enough when they are done properly and ethically.

The practice of spot delivering cars raises issues under federal law as well as state law, and the rules vary from state to state. If you haven’t already done so, you should thoroughly review your spot delivery forms and procedures with your lawyer. That’s unless you enjoy stroking big checks to your customers’ lawyers.